US-based retailers are leaning harder on India to open up the sector to more foreign investments.
Even as the Government itself is mulling raising the investment limit across industries and bringing greater clarity to the rules of the game, CEO of world’s largest retail store Scot Price and Vice-President (Government Relations) of California-based online shopping company eBay Ted Cohen will meet Commerce and Industry Minister Anand Sharma this week seeking policy clarifications and pitching for opening the doors wider.
Starting July 10, Sharma will be in the US on a four-day official tour and is scheduled to meet senior US Government officials and business representatives in Washington, New York and Chicago. He will meet Cohen in New York on July 10 and Price in Washington the next day.
“As the Government is currently discussing changes to the FDI sectoral caps and clarifications to the FDI policy in retail, the Minister’s office expects serious queries on the issue from both the US Government and business. The Minister is going prepared accordingly,” a Department of Industrial Policy and Promotion (DIPP) official told
A panel of officials headed by Economic Affairs Secretary Arvind Mayaram has proposed raising the FDI limit for multi-brand retail to 74 per cent from the existing 51 per cent.
India had opened up multi-brand retail to FDI up to 51 per cent late last year, but has not been able to attract investments so far largely due to lack of clarity on issues such as mandatory local sourcing and back-end investment.
The DIPP came up with some clarifications last month on the products to be sourced from the small-scale sector and back-end infrastructure to be created by investors, but there are still several grey areas.
“The DIPP will shortly move a Cabinet note clarifying that back-end investment by foreign retailers has to be done only the first time investments are brought into the country. US retail companies would need re-assurance on that,” the official said.
Biz opportunities
There are also expectations among online retail companies such as Amazon and eBay that the Government will remove restrictions on FDI in e-commerce. eBay is already in India as a 100 per cent subsidiary company of eBay Inc. as it claims to be operating as a market-place without holding any inventory. But FDI restrictions bring in uncertainties and limit business opportunities.
“If the Government removes e-commerce from the restricted list, foreign companies doing business in the virtual world can do so with total transparency and legality. They could also have a lot of funding options, including venture capital,” points out Arpita Mukherjee, Professor, Icrier.